It’s one of the biggest roadblocks on the path to homeownership. So big, in fact, that it keeps some people from even considering owning a home.
It’s the downpayment.
Raising even a small down payment can be incredibly tough for many would-be homebuyers. Even small down payments, as little as 3.5%, can total tens of thousands of dollars. With tight budgets and high costs of living, this can be insurmountable.
If you can’t raise a downpayment on your own, it doesn’t mean you will never own a home. Thanks to down-payments-assistance programs, which are offered by both public and private organizations, you can get the down payment you need for an affordable mortgage.
Think it sounds too good to be true? Keep reading and you’ll learn that down-payment assistance is anything but a fantasy…
Down-Payment Assistance: What Options are Available?
Housing Finance Agencies
These are agencies that are funded by states with the goal of helping homeowners purchase a home. They are responsible for a large variety of housing and community-improvement projects, including Mortgage Credit Certificates, or “MCC’s” which lower future tax burdens to the federal government. There are numerous housing finance agencies across the country, helping people, families, and even businesses with affordable home ownership.
To find a housing finance agency in your area, you can use the online directory from the National Council of State Housing Agencies. Simply select your state and you’ll be shown the contact information for the specific agency in your area. The office is usually located in the state capital, but it can also be located in a major city. Some states, such as New York, have multiple offices.
Local Government Programs
Counties and cities also provide a wide range of housing assistance programs, including down payment assistance. This funding is often provided through grants that are administered through local offices. While the programs are operated locally, much of the funding comes from the federal government, usually through the Department of Housing and Urban Development (HUD).
If you receive a grant through a local office, you likely won’t have to pay it back unless you sell the home within a certain period. These grants can be extremely beneficial for breaking the barrier created by down payments.
Equity Partnership Programs
Equity partnership is a unique program offered by private companies that help you overcome the challenge of a downpayment. In this program, a private organization contributes a specified amount towards your down payment. In return, the company receives a share of the increase in home value when you sell. It’s important to note that they don’t receive a share of the home’s total value, but a share of the change; if the home goes from $500,000 to $600,000, they receive a portion of the $100,000 difference.
The advantage to this program is that the investing company becomes a partner in your success. They want you to have a home the grows in value, as this will benefit both your financial standing and their long-term profitability.
To take advantage of equity partnership, contact San Diego Purchase Loans. We facilitate equity partnership programs through Unison, an investment company serving buyers and investment professionals.
Community Development Block Grant
The Community Development Block Grant program, or CDBG, is one of HUD’s longest-running and most successful programs. Designed to provide communities with development projects, the program assists with affordable housing, anti-poverty issues, and local infrastructure development. In certain situations, it can also be your source for down-payment assistance.
These funds are administered through over 1,100 offices located all across the country. They are given to communities through various steps, but they can go to both larger cities and urban areas as well as small towns and rural locations. In many cases, the individual states determine funding priorities, so check with your state government to learn more about this program.
Neighborhood Stabilization Program
This is actually a component of the CDBG program. The Neighborhood Stabilization Program is designated for communities affected by foreclosures and delinquencies, helping people in these areas purchase homes or improve existing structures. The goal, as the name implies, is to stabilize the real estate market in financially-turbulent areas.
To benefit from this program, you must have a low or moderate income that does not exceed 120% of the area’s median income. This program can help buyers purchase homes, but you must apply through the person issuing the funding, which is usually a government or non-profit agency.
National Homebuyers Fund
This is a non-profit public benefit corporation that was established in 2002 with the goal of expanding homeownership opportunities across the nation. They are dedicated to affordable and responsible home buying, and have helped over 36,000 individuals and families by providing over $307 million in down-payment assistance.
This organization provides grants, not loans, meaning if you qualify you won’t have to pay it back. They offer up to 5% of the loan amount, and it never has to be repaid, regardless of when you decide to sell. Their program is also not limited to first-time homebuyers, making it extremely useful for many different people.
Options for 100% Financing
If you are unable to qualify for down-payment assistance, you should consider applying for loans that will provide financing for 100% of the purchase. There are many government-backed lending programs that can help you secure a loan with little to no money down.
FHA loans can be secured with as little as 3.5% down, but there are programs that let you purchase a home with no down payment whatsoever. USDA-backed loans, which are issued on homes in certain areas (usually, but not always rural locations) are one such option. Loans backed by the Department of Veterans’ Affairs are also available with no downpayment. If you served in the U.S. military, or are the child or spouse of service personnel, these loans may be available to you.
Expert Guidance for Down-Payment Assistance
If you wish to buy a home, but are struggling to generate a down payment, talk to the knowledgeable staff at San Diego Purchase Loans.
With a deep understanding of all levels of the real estate market, we can help you find valuable resources for down-payment assistance, affordable mortgages, and real estate investments. Don’t let a down payment keep you from reaching your dreams, contact us today!
“Chad, Juliann and the team were great in helping me get through this process. It is not an easy process but they stayed with me the entire time and I am truly grateful. ”
Chad and his team was awesome throughout the entire process. They made things easy and smooth, and able to answer any questions at anytime. By far the best experience with a lending team yet. Great job!”
I was referred to Chad by my Realtor for a purchase of a new house. The experience with Chad and the team (I mainly worked with Juliann) was nothing short of outstanding. From start to finish there were always quick to respond and when needed, notify me of any new documentation that was required. There were very helpful explaining to me the pros and cons of different financing options as well as some other loan related issues, such as termite clearance outside the purchase contact and septic tank certification process. Overall, very knowledgeable and processional team. Loan preapproval was done in a single day and loan documents were ready for signing in 21 days, which was 9 days ahead of schedule. That never happened to me before.